Asian equities kicked off February lower after data released over the weekend showed Chinese factory growth slumped to a six-month low in January. But trading volumes were light with several Asian markets, including Shanghai and Hong Kong, on holiday for the Lunar New Year.
China's official Purchasing Managers' Index (PMI) fell to 50.5 in January from December's 51, heightening worries of an economic slowdown, data released on Saturday showed.
(Read more: Can China's weak PMI be blamed on Chinese New Year?)
Meanwhile, losses on Wall Street last week also weighed on sentiment. The Dow Jones Industrial Average dropped 1 percent on Friday, with U.S. shares recording their worst month in more than a year and first monthly loss since August.
Nikkei drops 2%
Japan's benchmark index extended Friday's losses to close at a fresh two-and-a-half month low on Monday, extending its declines into a third day. The Nikkei is down over 10 percent since hitting a six-year peak of 16,320 points on December 30, placing the index firmly in correction territory. On Monday, the Nikkei fell 2 percent to 14,619.13.
A stronger currency was to blame as the yen hit a session high of 101.89, near last Monday's eight-week high of 101.77, before paring gains. The currency also hit a two-month high against the euro at 137.38.
Among the biggest losers, index heavyweights SoftBank tumbled over 6 percent
Banks also suffered heavy losses with both Sumitomo Mitsui and Mizuho nearly 4 percent lower despite news from Mizuho that it is raising its dividend payout.
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Emerging markets mixed
Thai shares rallied over 1 percent to hit a one-week high after protesters in Bangkok disrupted voting in 18 percent of national constituencies in Sunday's election. More demonstrations are expected on Monday.
But Indian shares skidded 0.6 percent despite HSBC's manufacturing purchasing managers' inedx (PMI) hitting a near one-year high.
Seoul down 1%
South Korean shares played catch-up with the region after being shut on Thursday and Friday, leading the benchmark Kospi index to hover near fresh five-month lows despite upbeat economic data.
Factory activity hit an eight-month high in January, the HSBC/Market purchasing managers' index showed while housing prices rose for a fifth straight month.
Meanwhile, the posted its biggest daily percentage loss against the greenback in over seven months.
LG Electronics was the index's top loser, down 3.5 percent, while LG Display and Posco fell over 1 percent each.
(Read more: Are markets headed for a perfect storm?)
Sydney flat
A mixed bag of economic data and caution ahead of the Reserve Bank of Australia's policy Tuesday policy meeting weighed on Australian shares, with the ASX 200 closing down 0.1 percent. A private gauge of annual inflation slowed to 2.5 percent last month following a spike in the fourth quarter reading, while the Australian Industry Group's performance of manufacturing index declined in January.
Property shares were mixed after home prices across major cities rose a monthly 1.2 percent in January, according to RPData-Rismark. GPT Group fell 0.3 percent while Stockland jumped 0.8 percent.
Electronics retailer JB Hi-Fi added 3 percent after forecasting an 8.3 percent rise in full-year net profit.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC